Public Power - October 2008 - (Page 10)

PERSPECTIVE Transmission Solutions Work Best When Forged By All Stakeholders By Mark Crisson • President & CEO • American Public Power Association P powerelectric advocated for open ublic utilities access to transmission for decades—going back as far as the early 1960s. The Energy Policy Act of 1992 seemed to deliver on that long-sought promise. The federal law required owners of transmission to place their high-voltage lines under the control of an independent system operator, which would dispatch power to all comers. When, in 1996, the Federal Energy Regulatory Commission issued Rule 888, governing operation of open access transmission tariffs, the dream of a highway for electrons that offered the same open access as the nation’s interstate highways provides for motor vehicles seemed to be inching toward reality. But the age-old monopoly mindset of the electric utility industry quickly took over. Order 888 required transmission owners to file rate tariffs for transmission service with standardized terms and conditions. But utilities long opposed to competition quickly found ways to game the new system. One practice employed by transmission owners involves the decision surrounding how much capacity is available to support requests for service. Many owners have simply withheld transmission capacity from the market, thereby creating artificial constraints. Federal Energy Regulatory Commission rules seek to encourage development of new transmission facilities by offering rate incentives to transmission owners. In markets operated by regional transmission organizations, these incentives are packaged as “locational market pricing” or “LMP.” The concept of locational market pricing holds that areas suffering from a lack of ade10 OCTOBER 2008 quate transmission capacity will be enticed to develop new capacity if sent the right price signal. Therefore, wholesale customers in transmission-constrained areas end up paying higher costs for substandard service. If events developed as FERC expected, those extra dollars poured in to limited transmission infrastructure would naturally lead to construction of new transmission lines, thus eliminating the congestion. But the new transmission capacity has failed to materialize. A study completed for APPA last year documented the failure of locational market pricing to incent construction of new transmission. Short-term price signals are not adequate to support projects that are capital-intensive and require long-term financing, the study showed. Moreover, those price signals can be volatile because they are based on bids, not actual costs. Artificial price signals are not the appropriate mechanism for improving the nation’s transmission network. Such an approach would not work for interstate highways. It will not work for electronic highways. The process involved in planning and obtaining site permits for high-voltage transmission is nearly as complicated as that for an interstate highway. A power line carrying electricity from a remote power plant to electric load in an urban center necessarily crosses multiple parcels of land, often individually owned, in many local jurisdictions. The Energy Policy Act of 2005 empowered the U.S. Department of Energy to designate proposed transmission corridors as “national interest” paths, worthy of rapid approval to assure reliable delivery of electricity. But federal designation serves chiefly to flag the importance of a transmission corridor. The law gives the Federal Energy Regulatory Commission backstop authority to order construction of a line, but even that does not replace environmental permitting procedures overseen by state and local agencies. Orderly development of electric trans- mission infrastructure requires orderly planning on a broad multi-state, regional level. Some of the most successful transmission projects are those in which multiple stakeholders hold an ownership interest. In these cases, various owners recognize the need for transmission and communicate that need to their customers. With multiple owners, the responsibility for siting, financing and constructing new lines is shared by all parties. Public understanding of the need for new facilities is greater and government approval of land-use permits is eased. Recent experience in the midwestern United States shows how joint ownership can help. Eleven utilities in North Dakota, South Dakota, Minnesota and Wisconsin are collaborating on planning and construction of needed transmission lines. The utilities—three investor-owned, four municipal joint action agencies, one municipal electric system and three generation and transmission cooperatives—have developed a multi-phased approach to transmission expansion. They plan to spend between $1.4 billion and $1.7 billion to build three 345kV lines and one 230-kV line. Shared investment in the infrastructure helps assure the success of these projects. The municipal utility ownership share is a small portion of the overall transmission project. But the political and financial support that participating municipal agencies bring to the projects carries more weight in the siting and approval process than a national interest corridor designation. The stakeholders—not “big brother”—are behind the project and local siting authorities are more likely to understand the need for the project. Congress and the Federal Energy Regulatory Commission both need to do more to encourage joint planning and ownership of electric transmission facilities. T PUBLIC POWER

Table of Contents Feed for the Digital Edition of Public Power - October 2008

Public Power - October 2008 Contents Perspective 10 Questions The Future of Fuels in a Carbon-Constrained World An Energy Revolution Energy Policy in 2009 and Beyond A Green Reincarnation Beyond the Green Bandwagon Reliability Green Energy Community Broadband Customer Service Hometown Connections Human Resources Parting Shot

Public Power - October 2008

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.